Building trust for economic prosperity

Trust potentially can influence economic performance through “micro-economic” and “macro-political” channels.

PUBLIC trust is one of a country’s important foundations in governing and delivering effective public policy, driving economic prosperity and achieving better social-economic progress.

There is a positive relation existing between trust and the economy. Various studies have shown that countries’ businesses, governments and other institutions have engendered more trust experienced stronger per capita real gross domestic product (GDP) growth. It was concluded that economic growth rises by nearly one percentage point on average for each 15-percentage-point increase in trust.

The Global Trust Index Edelman (2022 to 2023) revealed that Malaysia was in the ninth spot out of 28 countries surveyed amid a drop in its trust score by three points to average 62 points in 2022-2023.

China was ranked top with an average score of 83 points, followed by Indonesia at 75 points while India in the fourth placing (73 points). Both Thailand and Singapore were ahead of Malaysia, each averaging at 66 points.The findings indicated that an overall decline of trust in government, businesses and non-governmental organisations (NGOs). Businesses and NGOs experienced a decline of two and one point respectively.

Prime Minister Datuk Seri Anwar Ibrahim said clarity of policies is important to generate confidence in foreign and domestic investors because there is a general decline in trust.

Hence, repairing the erosion of trust has economic advantages. And while it is easy to see how public trust can be eroded, rebuilding trust is pivotal and can be challenging.

How trust improves economic prosperity?

What is the link between trust and income per capita, investment and productivity?

Restoring and sustaining trust is essential for governance and integrity, and it is therefore necessary for government to build it among the public and investors.

When there is trust about the country’s ecosystem comprising political institution, public institutions, regulators, and government actors, businesses and investors will be more willingly to invest and continue doing business. Increasing business investment through equipment or software and technology will raise the productivity of workers and increase national output, raise national and people income as well as generate employment opportunities.

Trust potentially can influence economic performance through “micro-economic” and “macro-political” channels. At the micro level, strong social connected and interpersonal trust can reduce transaction costs, writing and enforcing contracts, and the supply of credit facilities to individual investors.

At the macro level, maintaining social cohesion underlying trust may strengthen democratic governance, improve the efficiency and integrity of public administration, and improve the quality and effectiveness of economic policies.

An effective government administration comes from a “whole-of-government” approach. The government has to proactively respond to complex policy issues, and ensuring the range of policies can be implemented timely and effectively. Fostering 3Cs in the publicadministration – co-operate and collaborate in a co-ordinated manner is the key element for achieving a single approach to government.

Better coordination

Citizens and businesses have increasing expectations for public services that are effective, of high quality and accessible. The outcomes can be achieved through better coordination and collaboration as well as sharing of data across organisational boundaries.Businesses’ trusting of the environment and the government’s ability to execute and accomplish its intended policy outcomes, such as business-oriented public service delivery and effective bureaucracy, they would be willingly to commit more investments.

More business investments are made possible are through a simplification of regulations and rules as well as compliance and cost reductions.

Hence, the lack of trust can be costly to the government, leading to loss of investment, productivity and economic growth.

Public trust in the government is crucial to increase voluntary compliance.

If the citizens perceived the government to be trustworthy, and have confidence in one that is able to deliver basic services with good governance and best practices, the public policies will get “buy-in” from the people and they will be more likely to comply with them.

The government can implement its policies without public resistance if the citizens trust that the policy-makers have their best interests at heart, and there is no vested interest involved.

The administration of a fair and transparent tax system, as well as monitoring, is a litmus test on how the citizens will comply with the tax payments.

If people think that the tax revenues are well spent on public goods and services with the government ensuring trustworthiness against profligacy, the citizens would have intrinsic motivation and willingness to pay taxes.Likewise for subsidy rationalisation, effective communication is needed to explain the reasons for shifting to more targeted mechanisms and their benefits for the economy.

More importantly, the government needs to regularly publish information on the size of the targeted social assistance programme and how this will affect its budget. The strategic action plan for strengthening public confidence and trust should be built on four strong pillars: Communication, Integrity, Transparency and Engagement.

> Communication. Leverage on prompt, open, clear and transparent public communication to thwart disinformation and policy responses that would undermine trust, leading to confusion, inconsistencies and more uncertainties.> Integrity. Integrity and fairness are crucial determinants of building trust in government and public institutions. Hence, the policy-making process must be thoroughly debated and discussed before implementation through ensuring high standards of behaviour in the public sector.

We have to reinforce the credibility of those involved in policy decision-making to limit undue influences (rent-seeking behaviour), avoid conflict of interests and safeguard the people’s interest.> Transparency. Transparency about how the tax payers’ money is being spent is crucial. The government and agencies responsible for the administering of budget allocation, including various stimulus money must be held accountable for their spending in a transparent and comprehensible way.

Transparency in the tax system and budget spending is critical to building trust in policies and policy outcomes. For many years, the Auditor General’s annual reports had highlighted corruption, waste and “leakages”of public funds. All these need to be tackled to rebuild trust.

> Engagement. We need to strengthen the government’s interactive process and get serious about the open government concept to promote inclusive and participatory to implement responsive policy making. The government has a duty to listen to constructive criticisms and to be consultative.

Promoting public engagement and rebuilding trust is not about putting government data on websites, it is also about allowing public participation in the process, and ensuring that public services are adapted to people’s needs.

Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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